BJ's 'Turns the Corner' in Robust Q2
CEO sees pandemic accelerating results of transformation. The membership club chain gained grocery share, members and traffic in the second quarter.
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A combination of new members and more frequent purchases among existing shoppers is helping BJ’s Wholesale Club gain share in grocery and is supercharging results of an ongoing transformation.
The Westborough, Mass.-based membership warehouse club said grocery comps improved by 25% in its fiscal second quarter behind increases in both traffic and ticket, headlining strong financial results that exceeded analyst estimates. Total revenue for the period, which ended Aug. 1, improved by 18.4% to 3.95 billion, reflecting an 18.4% increase in merchandise sales and 10.4% membership revenue growth. The company surpassed 6 million paid members in the quarter. Comps excluding gasoline improved by 24%.
Officials reviewing the results in a conference call said the performance relates both to favorable changes in consumer shopping behavior that came with the pandemic and also traction on internal strategies going into the crisis, including new approaches to marketing, merchandising and digital. What the company calls digitally enabled sales—orders for including home delivery and club pickup—grew by 300% in the quarter and accounted for 6% of the comp figure.
“I believe that we have turned the corner from merely reacting to the pandemic to proactively transforming our business to enable a much brighter future for the company,” BJ's CEO Lee Delaney said according to a Sentieo transcript. “We have a radically different company than we had just six short months ago. In many areas of the company, we are now years ahead of how we thought our transformation would evolve, and we are actively looking for ways to increase the pace of progress.”
Robert Eddy, BJ’s chief financial officer, added: “2020 has been an incredibly transformative year for our business and will catapult us forward into the future.”
BJ’s grocery comp indicates it was gaining share, said Delaney, noting its growth consisted of about a one-third increase in traffic and a two-thirds gain in average ticket—bucking a trend of declining traffic among many of its peers in the club, mass and grocery channels. Sales have also maintained momentum, officials noted, with comps in the current quarter up by 20%.
Delaney said BJ’s was accomplishing this amid “challenges that impacted every aspect of our business,” including ongoing adherence to safety measures and rising costs for workers and the supply chain.
Delaney, who succeeded Christopher Baldwin as BJ’s CEO in March, has outlined aggressive plans to grow the company faster and more profitably, saying this week the pandemic has helped to accelerate that transformation.
He noted progress during the quarter in a reset of its food business behind tighter assortment and more healthy and natural goods, saying those offerings had appeal to the younger shoppers the company has been reeling in. In general merchandise, Delaney described acquiring new brands and “opportunistic” buying in apparel that took advantage of pandemic-related disruption in the wider retail business.
He also noted where BJ’s had room to improve services in manner not unlike rival Costco, for example, a mobile phone service deal AT&T for members and a return of departments like optical that had shut down in the initial weeks of the pandemic.
“We know [services] is a place where our competitors, most notably, Costco, have enormous businesses,” Delaney said. “And we by and large haven’t participated much in the past. And so we have new offerings in optical and cellular phones, in home improvement, in major appliances, that are scaling quite nicely despite the backdrop of a pandemic, and I think those will be multiyear growth vehicles for us.”
Delaney also reiterated intentions to grow new stores faster, particularly now that it has more confidence its model and customer acquisition strategies are right, and while real estate opportunities are open to it amid a wave of wider retail failures. BJ’s has at least six new clubs on the agenda for next year, but Delaney said he was hoping for “significantly more” as opportunities arise.
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